Glass Lewis, ISS in favour of Bayer management but against pay package

The recommendations from Institutional Shareholder Services (ISS) Inc and Glass Lewis are typically followed, and may provide some breathing room for the top brass of Germany’s Bayer, which has lost tens of billions of euros in value since its Monsanto acquisition in 2018. (A Bayer Pharmesutical factory in Germany.)

FRANKFURT: Two shareholder proxy services recommended that investors vote in support of Bayer AG chief executive officer Werner Baumann’s team at this month’s annual meeting, but against a compensation package they termed excessive.

The recommendations from Institutional Shareholder Services (ISS) Inc and Glass Lewis are typically followed, and may provide some breathing room for the top brass of Germany’s Bayer, which has lost tens of billions of euros in value since its Monsanto acquisition in 2018.

Although shares have recouped part of the past years’ declines, some shareholders –including long-time investor Temasek Holdings Pte – have lost faith in Baumann to spearhead a sustained turnaround, and have called on Bayer’s chairman to find a replacement, Bloomberg News reported last month. Alatus Capital, another shareholder, has objected to ratifying the performance of Baumann and his management team at the April 29 meeting, pointing to the loss in market value during his time at the helm.

Glass Lewis said in a note to clients that “we do not believe it is in shareholders’ interests to broadly recommend to withhold support from this proposal at this time.”

They acknowledged, though, that some shareholders may be “reasonably concerned with the company’s performance and its substantial environmental, social and governanceand product risk exposure.”

ISS echoed that sentiment, yet said it may recommend a vote against Bayer’s management in the future should the company not make significant progress in resolving the pending litigation around its herbicide Roundup, part of the Monsanto acquisition.

The proxy firms, meanwhile, criticised Bayer’s executive compensation system, saying it failed to reflect performance and the potential fines from Roundup settlements.

Adjustments Bayer made to the short-term incentive bonus have resulted in “payouts that do not accurately reflect company performance,” and some pension contributions for executives “can be considered excessive and are not aligned with the wider workforce or market practice,” ISS said.

It recommended that shareholders vote against the remuneration report.

Glass Lewis also said the remuneration system failed to account for possible fines from pending litigation.

“We are troubled by two decisions taken by the board in the past fiscal year, namely the exclusion of litigation effects from the free cash flow metric under the annual bonus scheme, and the full awards to a departing management board member,” Glass Lewis said. — Bloomberg